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Johnston Press PLC (JPR)

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Tuesday 11 August, 2015

Johnston Press PLC

Interim Results

RNS Number : 6453V
Johnston Press PLC
11 August 2015
 

11 August 2015

 

JOHNSTON PRESS PLC

RESULTS FOR THE 26 WEEK PERIOD ENDED 4 JULY 2015

 

Underlying profit before tax increased by £9.5m to £17.8m;

Net debt reduced by £10.9m from the year end to £183.3m1

 

Johnston Press plc ("Johnston Press" or "the Group"), one of the leading local media groups in the UK, announces its interim results for the 26 weeks ending 4 July 2015.

 

The Group traded well in the first quarter and while the second quarter was impacted by a slowdown in general trading, July has shown some improvement.

 

Key highlights1:

•      Digital audience grew by over 20% to an average monthly audience of 19.9m in H1 2015 (2014: 16.7m)

•      Digital revenues: Up 17.5% for the period, from £14.1m to £16.5m now representing 20.5% of advertising revenues (H1 2014: 16.6%)

•      Revenue: Total underlying revenues of £128.9m (H1 2014: £135.1m) reflect a decline of 4.6% for the period (H1 2014: (4.3)%)

•      Costs: Cost savings of £7.6m (gross) offset revenue declines, and funded digital investment of £2.6m in the period

•      Operating profit: Underlying operating profit reduced £1.2m to £27m, sustaining a market leading margin of 20.9%Profit before tax: Underlying profit before tax increased 114.3% to £17.8m from £8.3m, reflecting reduced interest expense following refinancing

•      Continued debt reduction: Net debt reduced to £183.3m (2014 FY: £194.2m)

 

Financial Highlights:

£ million

 

Continuing Operations -  Underlying1

 

Continuing Operations -  Statutory

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

Change

 

2015

 

2014

 

Change

 

 

26 weeks

 

26 weeks

 

%

 

26 weeks

 

26 weeks

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

128.9

 

135.1

 

(4.6)

 

128.9

 

135.8

 

(5.1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

27.0

 

28.2

 

(4.3)

 

22.2

 

24.9

 

(10.8)

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

17.8

 

8.3

 

114.3

 

2.2

 

(6.3)

 

134.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Debt

 

183.32

 

185.52

 

1.2

 

183.1

 

181.6

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

11.44p3

 

7.43p3

 

54.0

 

1.43p4

 

(0.11p)4

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

1 The results are presented on a continuing underlying basis which is excluding exceptional items and including adjustments to reflect pensions, share based payments, bond mark-to-market valuations and adjustments made to the prior year comparative for the Letterbox direct delivery business which was outsourced in October 2014.

2 Underlying net debt is stated excluding fair value mark to market valuation adjustments on the Group's bonds.

3 Underlying EPS presented above represents the pro forma underlying (fully diluted)  earnings per share and has been calculated using the closing weighted average number of ordinary shares (105.3 million) at 4 July 2015 and applied to each period. Weighted average number of shares in H1 2015 was 105.3 million compared to 2.464 billion in H1 2014. This excludes shares held by the company's employee benefit trust of 0.6 million (0.5 million 3 January 2015) and includes the maximum potential dilutive impact of unvested awards under the Company's share schemes and warrants.

4 The Statutory figures presented represent both Basic and Diluted earnings per share for H1.

 

Strategic progress

The Group continues to transform the business in line with the strategic priorities previously set out.  The Group has completed the first phase of a major structural change, implementing Newsroom of the Future (which aims to increase digital engagement, and arrest print decline rates, whilst improving operational efficiencies) across the Group, and has commenced the planning and design for the implementation of Salesforce of the Future (a project aiming to increase customer penetration, focus on solution selling and improve digital upsell).  These strategic initiatives are designed to underpin the further development of the business.

 

Build overall audiences

•       Average monthly audience (across print and digital) for the period was up 8.7% year on year to 29.4m.

•       Digital audiences grew 3.4m (20.4%) to 19.9m unique users a month, year on year.

 

Growing digital substantially

·      Digital advertising grew 17.5% year on year to £16.5m. Excluding the Employment category, which was particularly impacted in Q2, our overall digital growth was 22.9% year on year.

·      Digital display advertising revenues of £6.1m were up 30% year on year, including strong growth in 1XL - our digital advertising exchange partnership with other local media groups.

·      Mobile revenues almost doubled in the period from January to June 2015 while the proportion of mobile inventory sold at premium rates grew 50%.

 

Returning to top line revenue growth

•       Total underlying advertising revenue has declined 5.1% in the first half of this year (H1 2014: 4.6%).  Although the Group traded well in the first quarter, the second quarter was impacted by a slowdown in general trading, with May down 9.5%*. Trading in July has improved, reflecting a year on year advertising revenue decline of 7.7** for the month. 

•       Print advertising revenue declined 9.5% in the period to £64.1m (H1 2014: (8.7)%).

•       Underlying newspaper sales revenue declined 5.3% year on year to £37.6m for the first half (H1 2014: (4.0)%), reflecting a decision to keep cover prices unchanged in over 60 of our titles.

 

* after adjusting to comparable number of weeks

** based on Week 30 YTD Sales analysis

 

 

Managing costs

Underlying operating costs were reduced by a net £5.0 million (5.3%), balancing tight cost control with  further investment in the digital business.

 

Growing profitability

Underlying profit before tax increased by £9.5m, or 114.3%, to £17.8m (H1 2014: £8.3m), benefiting from the reduced underlying finance charges of £9.2m (H1 2014: £19.9m) as a result of the 2014 refinancing.

 

Pay down debt

Net debt was £183.3 million, a reduction of £10.9 million from the 2014 year-end. Net debt after mark-to-market adjustments was £183.1 million, a reduction of £1.5 million from the year-end, as the market price of the 8.625% bonds traded up £9.3m during the period.

Net debt has fallen from c.£300m at the start of 2014 pre refinancing to c.£183m at the 2015 half year and our interest rate over the same period has fallen from 11.7% to 8.625%.

 

Our aim is to continue to pay down debt and we will consider opportunities to repurchase bonds as they arise where financially attractive to do so.

  

Outlook

As highlighted in the trading update of 14 July 2015, as a result of the off-trend trading in the second quarter, the business enters the second half from a lower base than planned.  The advertising revenue results for July 2015 down 7.7% represent an improvement on the rate of decline in Q2 2015. We believe in our strategy and are confident that our transformation projects will position the Group well for the future. 

 

Ashley Highfield, Chief Executive, commented: 

"Trading conditions in the first half of 2015 have undoubtedly been challenging, with May and June being particularly difficult - a time when there was also a high degree of uncertainty in the wider market.   

"However, we believe, local publishing, with SMEs representing 80% of our advertising revenue, is not as volatile as national publishing. We have seen some improvement in reducing the decline in advertising revenues in July compared to July 2014.  We will continue to drive for further improvement in revenues, albeit off a lower base, and will also continue to target further cost savings.

"Our strategy remains constant and is showing real traction. Digital now accounts for over 20% of advertising revenues, up from 13% two years ago.  Digital display saw growth of 30% in the period and we are developing new digital products such as AdPerfect# and Powerlistings~ aimed at small businesses. Our participation in the industry-wide 1XL national advertising exchange has contributed to our national digital advertising revenues growing by 120% in the period to £2.0m."

# Ad Perfect - A self-serve advertising solution that allows you to create your own advert on-line

~ Power Listings (Yext) - We manage the customer's profile across multiple business listing services. 

 

For further information please contact:

Johnston Press

Ashley Highfield, Chief Executive Officer

David King, Chief Financial Officer

 

020 7612 2601

020 7612 2602

Bell Pottinger

Dan de Belder

Zoë Pocock

Stephanie Sheffrin

 

020 3772 2561

 

Investor presentation and audio/webcast: A presentation for analysts and live audio/webcast will be held at 9.00am on Tuesday 11 August 2015 at Bell Pottinger, Holborn Gate, 330 High Holborn, London, WC1V 7QD.

 

Webcast link: https://secure.emincote.com/client/johnston_press/johnston002/ 

 

 A replay will be available after 2.00pm on the Group website www.johnstonpress.co.uk 

 

Please see the conference call dial in details below:

Number: +44 20 3059 8125 (no pin needed)

 

The announcement for the period ended 4 July 2015 will be available at www.johnstonpress.co.uk/investors

 

Forward-looking statements

The report contains forward looking statements. Although the Group believes that the expectation reflected in these forward- looking statements are reasonable, it can give no assurance that the expectations will prove to have been correct. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward looking statements. The Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. 

 

Basis of presentation

In preparing the commentary on performance, the financial impact of a number of significant accounting and operational items affecting the results have been adjusted for in arriving at the underlying results discussed in this review.

Underlying results have been adjusted to exclude exceptional items, and other adjustments have been made to reflect the 'underlying business' including the impact of pensions, share based payment charges, Bond mark-to-market valuation and adjustments made to remove the revenue and operating costs from the prior period comparative for Letterbox direct delivery business which was outsourced in October 2014.

Results for the six months ended 4 July 2015

A summary of the key financial results is set out in the table below:

 

Comparison of Statutory to Adjusted and Underlying Performance

 

 

 

 

 

26 weeks ended 4 July 2015

Statutory

Exceptionals¹

Other²

Underlying²

 

£m

£m

£m

£m

Total continuing revenues

128.9

-

-

128.9

Operating costs³

(103.5)

4.2

0.6

(98.7)

EBITDA4

25.4

4.2

0.6

30.2

Depreciation & amortisation

(3.2)

-

-

(3.2)

Operating profit

22.2

4.2

0.6

27.0

Net finance costs

(20.0)

-

10.8

(9.2)

Share of results of associates

-

-

-

-

Profit before tax

2.2

4.2

11.4

17.8

Operating margin

17.2%

 

 

20.9%

 

26 weeks ended 28 June 2014

Statutory

Exceptionals¹

Other²

Underlying²

 

 

£m

£m

£m

£m

 

Total continuing revenues

135.8

-

(0.7)

135.1

 

Operating costs³

 (108.2)

2.9

1.1

(104.2)

 

EBITDA4

27.6

2.9

0.4

30.9

 

Depreciation & amortisation

(2.7)

-

-

(2.7)

 

Operating profit

24.9

2.9

0.4

28.2

 

Net finance costs

(31.2)

9.0

2.3

(19.9)

 

Share of results of associates

-

-

-

-

 

(Loss)/profit before tax

(6.3)

11.9

2.7

8.3

 

Operating margin

18.3%

 

 

20.9%

 

 

 

 

 

 

 

¹ Exceptional items are set out in Note 4 to the financial statements.

² Other adjustments reflects the impact of pensions (Note 15), share based payments (Note 17), Bond mark-to-market valuation and adjustments made to the prior period comparative for Letterbox direct delivery business which was outsourced in October 2014.

³ Operating costs include cost of sales and are stated before depreciation and amortisation.

4 EBITDA is earnings before interest, tax, depreciation and amortisation.

 

 

Revenue

Total statutory reported revenue in the first half of 2015 declined 5.1% to £128.9m.  Underlying revenues declined 4.6% to £128.9m.

 

Performance Review for Continuing Operations

 

 

 

 

Statutory

 

Underlying¹

 

 

 

2015

2014

change²

change²

 

2015

2014

change²

change²

 

 

 

£'m

£'m

£'m

%

 

£'m

£'m

£'m

%

 

 

Advertising revenue

 

 

 

 

 

 

 

 

 

 

 

Print

64.1

70.8

(6.7)

(9.5%)

 

64.1

70.8

(6.7)

(9.5%)

 

 

Digital

16.5

14.1

2.4

17.5%

 

16.5

14.1

2.4

17.5%

 

 

Total advertising revenue

80.6

84.9

(4.3)

(5.1%)

 

80.6

84.9

(4.3)

(5.1%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non advertising revenue

 

 

 

 

 

 

 

 

 

 

 

Newspaper sales

37.6

39.7

(2.1)

(5.3%)

 

37.6

39.7

(2.1)

(5.3%)

 

 

Contract printing

6.3

6.3

-

-

 

6.3

6.3

-

-

 

 

Other

4.4

4.9

(0.5)

(10.2%)

 

4.4

4.2

0.2

4.8%

 

 

Total other revenues

48.3

50.9

(2.6)

(5.1%)

 

48.3

50.2

(1.9)

(3.8%)

 

 

Total continuing revenues

128.9

135.8

(6.9)

(5.1%)

 

128.9

135.1

(6.2)

(4.6%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs³

(106.7)

(110.9)

(4.2)

3.8%

 

(101.9)

(106.9)

(5.0)

5.3%

 

 

Operating profit

22.2

24.9

(2.7)

(10.8%)

 

27.0

28.2

1.2

(4.3%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit margin

17.2%

18.3%

 

 

 

20.9%

20.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

¹ Underlying results excludes Exceptional items (Note 4) and includes adjustments made to reflect pensions (Note 15), share based payments (Note 17), Bond mark-to-market valuations and adjustments made to the prior year comparative for Letterbox direct business which was outsourced in October 2014.

² % change variance and amount has been calculated based on unrounded numbers.

³ Operating costs include cost of sales, depreciation, amortisation and operating exceptional items.

 

 

 

 
                       

 

 

Underlying Revenue Analysis

 

The business earns £103m, 80% of its income, from publishing its own newspapers and magazines, £16.5m, 13%, from digital publishing and the balance from contract printing and third party publishing titles.

 

26 week period

 

2015

2014

% change¹

 

£m

£m

 Print revenues

 

 

 

  Circulation

37.6

39.7

(5.3%)

  Advertising (JP owned titles)

62.0

68.3

(9.0%)

  Other print related revenues

3.6

3.4

(5.9%)

 Total Print revenues

103.2

111.4

(7.4%)

 

 

 

 

Digital revenues

16.5

14.11

17.5%

 

 

 

 

Contract revenues

 

 

 

  Printing

6.3

6.3

0.0%

  Other

0.8

0.8

0.0%

  Publishing (Advertising)

2.1

2.5

(13%)

Total Contract revenues

8.4

8.8

(4.5%)

 

 

 

 

Total revenues

128.9

135.1

(4.6%)

 

Print and Digital Advertising Revenue

 

 

Underlying Advertising Revenue Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26 week period

 

Print

 

Digital

 

2015

2014

% change¹

 

2015

2014

% change¹

 

2015

2014

% change¹

 

£m

£m

 

£m

£m

 

£m

£m

Property

10.9

12.2

(10.6%)

 

10.1

11.5

(12.0%)

 

0.8

0.7

12.2%

Employment

10.3

10.8

(5.1%)

 

5.7

6.4

(11.7%)

 

4.6

4.4

4.6%

Motors

6.8

7.3

(6.0%)

 

5.8

6.5

(9.7%)

 

1.0

0.8

25.6%

Other 

20.2

20.6

(1.7%)

 

16.2

17.1

(5.3%)

 

4.0

3.5

16.1%

Display

32.4

34.0

(4.8%)

 

26.3

29.3

(10.5%)

 

6.1

4.7

30.0%

Total

80.6

84.9

(5.1%)

 

64.1

70.8

(9.5%)

 

16.5

14.1

17.5%

                               

 

 

¹ % and variance change has been calculated based on unrounded numbers.

Within total advertising revenue, print advertising ended 9.5% down year on year with the second quarter performance being off-trend having suffered from advertisers holding back spend during May and June.  Digital revenues grew by 17.5% (from £14.1m to £16.5m) in the period.

·      Property was disappointing, the sector continuing to suffer from a lack of supply of properties for sale, so impacting advertising.

·      Employment - office of national statistics reported a rise in unemployment for the period March to May 2015. Other market insight shows a fall in permanent and temporary placements in June 2015 relative to June 2014. In the company, following a good January activity slowed down, coming off further in the second quarter. While Smartlist and other outbound activity performed well, inbound calls in particular slowed significantly during the second quarter.

·      Motors showed strong growth in digital, up 25.6% driven by a strong car sales market in the period, a continuation of growth seen in the second half of 2014.

·      Other, including digital kitbag, saw good growth in the period, up 16.1%.

·      Display display revenues, having grown 30% from H1 2013 to 2014, grew a further 30% from H1 2014 to 2015, benefitting in 2015 from the launch of 1XL, the digital advertising exchange partnership with other local media groups (excluding Trinity Mirror). In Print display, both local and national display tracked expectations in quarter one, local display slowing in quarter two, while national display, although a smaller category, saw a substantial slow-down in quarter two (£800k down), offsetting much of the digital gains in the half.

Newspaper sales

Underlying newspaper sales revenues were down 5.3% in the first half of the year, reflecting a conservative approach to cover price increases whilst we focus on improving volume run-rates.  As a result 66 titles are now declining at less than 11%, an improvement from 49 titles in June 2014.

 

Contract printing

Underlying Contract print revenues in the first half of the year were in line with the prior year, delivering £6.3m of revenue in the first half of 2015 and 2014. In March the Group won a significant four-title print contract with Express Newspapers in a multi-million pound, five year deal; printing commenced at the Group's Dinnington plant in July.  The print slot was formerly occupied by a Trinity Mirror contract.

 

Other revenues

Statutory other revenues declined £0.5m period on period, which can be attributed to the outsourcing of the Letterbox leaflet business in October 2014.  On an underlying basis, other revenues improved £0.2m period on period.  Other revenues include reader offers, syndication revenue, and waste sales.

 

Gross margin and operating profit

The Group achieved a statutory operating profit of £22.2m in the first half (28 June 2014: £24.9m profit).

 

Trading results in the first half of the year have been challenging.  The Group has continued to balance the need for investment in digital and journalism with cost savings.  Within operating profit, underlying operating expenses continue to be actively managed and have reduced by £5.0m (£7.6m cost savings delivered net of £2.6m digital investment) compared with the same period in 2014. The reduction in costs includes current year savings (through lower headcount, office rationalisation and other initiatives) as well as the full year effect of the savings made last year. We are confident that we will achieve further cost savings in the year.

 

The tight management of costs has allowed us to maintain a robust underlying operating margin for the first half at 20.9% (28 June 2014: 20.9%).

 

Finance costs¹

2015

2014

change

 

£m

£m

Interest on bond

(9.7)

(2.3)

(7.4)

Interest on bank overdrafts and loans

(0.2)

(11.6)

11.4

Payment-in-kind interest

-

(5.3)

5.3

Amortisation of term debt issue costs

(0.1)

(2.3)

Total operating finance costs

(10.0)

(21.5)

 

 

 

 

Total exceptional finance costs

-

(9.0)

9.0

 

 

 

 

Total finance costs

(10.0)

(30.5)

¹ Finance costs (included in the table above) exclude the Bond mark to market, pension finance costs and investment income.

 

 

Finance costs (continued)

Operational finance costs have decreased by £11.5m compared to prior year, a direct result of the refinancing completed in May 2014. Refer to note 14.

 

Exceptional finance costs totalling £9.0m were incurred in relation to the refinancing in the prior period.  Refer to note 4.

 

In the period, an adjustment to the value of the bond and charge to the income statement of £9.3m has been recognised on the Bond, compared to £0.6m loss in the comparative period. Refer to note 6b.

 

Exceptional Items

Exceptional operating items totalling £4.2m have been recognised in the first half of 2015 (28 June 2014: £2.9m).  This comprises £2.4m of restructuring costs, £0.9m of Pension Protection Fund levy, £0.5m of one-off Value Creation Plan costs and £0.4m of business development costs. In 2014, a gain on disposal of £0.8m was recognised within exceptional items. Refer to Note 4. 

 

Of the £4.2m charge to exceptional items in the period ended 4 July 2015 (28 June 2014: £2.9m), £3.6m were cash items (28 June 2014: £1.9m).

 

Taxation

Corporation tax for the interim period is charged at 21.5% (28 June 2014: credited at 58.3%, 3 January 2015: credited at 35.9%), including deferred tax. In the prior periods, the effective tax rate is higher than the nominal rate, due to the timing of deferred tax movements.  Refer to Note 7.

 

Dividends              

Following the completion of the £275m capital reduction referred to below, the Group has paid preference share dividends relating to 2014 and the first half of 2015.

 

The provisions of the bond restrict the Company's ability to pay dividends on the Company's ordinary shares until certain conditions, including that net leverage is below 2.25x EBITDA, are met.  Although the Board wishes to resume dividend payments as soon as is appropriate, no ordinary dividend is proposed for the period.

 

Earnings per share

The 2014 rights issue and subsequent share consolidation distort the EPS metrics for the prior year. For information, underlying and proforma calculations are presented below (note 9):

 

The proforma table is presented based on the number of shares now in issue having adjusted for the effect of the rights issue and subsequent consolidation of 50:1.

 

Continuing operations

Underlying Basic EPS

Proforma Underlying Basic EPS2

Proforma Underlying Fully diluted EPS3

 

H1 2015

H1 2014

H1 2015

H1 2014

H1 2015

H1 2014

Earnings (£m)1

14.1

9.2

14.1

9.2

14.1

9.2

Number of ordinary shares (m)

105.3

2,464.2

105.3

105.3

123.4

123.4

EPS (pence)4

13.41

0.37

13.41

8.71

11.44

7.43

 

1 All figures are shown post tax and exclude exceptionals and other underlying adjustments.

2 Underlying Proforma uses underlying profit and the 4 July 2015 half year weighted average number of shares. 

3 Underlying Fully diluted Proforma takes into account all current unvested shares that have a dilutive effect (18.1 million).  At the current share price these options are unlikely to be exercised and therefore for statutory reporting purposes there is no dilution impact.

4 EPS has been calculated based on unrounded numbers.

 

 

Cash Flow/Net Debt

Net debt is £183.3 million excluding the £9.3 million mark-to-market loss on the bond, a reduction of £10.9 million from the year-end position.  Net debt after mark-to-market is £183.1 million, a reduction of £1.5 million from the year-end position.

 

Net cash inflow from continuing operations in the 26 weeks ended 4 July 2015 amounted to £25.0m after pension contributions of £3.3m and redundancy costs of £5.3m. Refer to note 18.

Cash held at 4 July 2015 was £41.7m, an increase of £10.9m compared to 3 January 2015 and £2.2m compared to 28 June 2014. During the period to 4 July 2015 redundancies payments amounted to £5.3 million (28 June 2014: £14.0 million, 3 January 2015: £17.2 million) a reduction of 62% compared to prior year. Pension funding contributions were £3.3 million (28 June 2014: £6.2 million, 3 January 2015: £14.5 million). The Group continues to maintain a tight control of working capital and capital expenditure with £4.3m having been spent on asset purchases (28 June 2014: £3.7m, 3 January 2015: £8.7m) offset by £0.7m received from non-essential asset sales (28 June 2014: £6.3m, 3 January 2015: £8.0m). 

 

Cash interest paid in the first half was £9.9m (28 June 2014: £16.5m, 3 January 2015: £27.0m), a decrease of 40.0% on the same period in 2014.

 

Pensions

The Group's defined benefit pension plan obligation has decreased by £2.9m, from the year-end, to £87.1m reflecting increased contributions (£3.3m in the period), partially offset by movements in the financial assumptions including an increased discount rate and inflation assumptions compared to June 2014. 

 

Following the renegotiations of contributions to the deficit reduction plan, the minimum amount of contributions committed to be paid to the scheme during 2015 is £6.5m, this contribution level has increased from prior year contributions of £6.3m. Refer to Note 15.

 

Bond buy-back 

As announced in February 2015, consistent with the strategy to use surplus cashflow to reduce the overall leverage of the Company over time, the Company has allocated £5.0m of its cash to buy-back bonds.  The Group will effect the purchase as soon as it is able.

 

Share capital reduction

At the Company's Annual General Meeting on 27 June 2014, a special resolution was approved to initiate a process to reduce the Company's share premium account by £275 million. The completion of the capital reduction was confirmed by an Order of the Court of Session, Scotland on 29 April 2015 and registered at Companies House on 5 May 2015.  The capital reduction eliminates the opening accumulated deficit of £179.9 million on the Company's profit and loss account and created positive distributable reserves of £98.2 million at 30 May 2015.  This will enable the Company to make distributions and provide loans to the Johnston Press plc Employee Share Trust ("JP EST") to satisfy options under the Group's share ownership schemes.  Since the successful capital reduction the Group has paid preference share dividends relating to 2014 and the first half of 2015.

 

Acquisition

On 3 July 2015 Johnston Publishing Limited, a subsidiary of Johnston Press plc, acquired 100% of the share capital of Love News Media Limited, the publisher of the Brighton & Hove Independent, a free weekly title with a circulation of over 13,000 copies, for a total consideration of £90,000. Of this £30,000 has been deferred and will be settled subject to performance requirements set out in the acquisition agreement. The title, including its popular associated website: www.brightonandhoveindependent.co.uk and @BrightonIndy twitter following complements the South portfolio of assets. This title now allows the Group to serve customers along the Sussex coast.

 

Events after balance sheet date

Refer to note 21 for details of significant post balance sheet events.

 

Related party transactions

Related party transactions are disclosed in Note 20.

 

There have been no material changes in the related party transactions described in the last annual report.

 

 

Principal risks and uncertainties

There are a number of potential risks and uncertainties which have been identified by the business that could have a material impact on the Group's long-term performance.

 

The following significant market risks are important to the overall performance of the Group, and the Group has no control over these risk factors.  The Directors consider the most significant market risks to include changes in gross domestic product and unemployment rates, levels of property transactions, new car sales and consumer confidence, and public sector spending. 

 

The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the 53 week period ended 3 January 2015.  A detailed explanation of the risks summarised below, and how the Group seeks to mitigate the risks can be found on pages 21 to 22 of the annual report which is available at http://www.johnstonpress.co.uk/investors/reports-results-presentations.

 

Further Reductions in Print Advertising 

Print advertising revenues could decline at a faster rate due to further migration of customer spending to online media and a lack of consumer confidence in some of the markets in which we operate.

 

Newsprint Price and Supply Risk 

Although paper prices have fallen over the course of the past 12 months future price rises represent a risk to the Group in terms of both supply and pricing of newsprint which, after staff costs, is the largest single expense incurred by the business.

 

Failure to Monetise Increased Readership of our content on Websites and Mobile devices. 

This is an industry issue. On-line advertising rates are lower and it is difficult to charge for accessing news on-line because free alternatives exist.

 

Pension Deficit Funding

The Group Defined Benefit pension scheme is currently in deficit leaving the Group responsible for potential shortfalls, in particular driven by sustained low interest rates. 

 

Business Opportunities Constrained by Debt

The Group continues to operate with greater than optimal levels of gearing, hence continued reduction of debt over time remains a priority.  However, this focus could lead to missed revenue opportunities if insufficient funds are left available for investment.

 

Business Change

The Group is implementing two major projects to revise the organisation of its news rooms and its sales model which may cause disruption during the transition.

 

Adequacy of Human Resources

Like most organisations there is an element of dependency on certain key individuals in the Group.

 

Lifestyle and Technology Changes Affect Newspaper Circulations

Newspaper circulations continue to decline due to increased availability of news through alternative media channels and changing reader habits.

 

Slowdown in Rate of Digital Growth and Reduction in Advertising Rates for Mobile

The Group experienced strong growth in its digital income streams in recent years. The rate of growth could slow down if customers seek alternative routes to audiences served. The industry as a whole has seen a shift towards accessing digital content through mobile devices which generally attract lower advertising rates than the rates achieved for desktop devices.

 

Liquidity and Going Concern

At the period end, the Group has gross debt of £225m, cash on balance sheet of £41.7m, and the Group has access to a £25m revolving credit facility (RCF) which remains undrawn. The bond (Senior Secured notes) has a five year maturity due 2019, and the Group's RCF matures on 23 December 2018.

 

The Group's policy is to ensure it has committed funding in place sufficient to meet foreseeable peak borrowing requirements. Based on its review, and after considering reasonably possible downside sensitivities, the Board is of the opinion that the Group has adequate financial resources to meet operational needs for the foreseeable future, and have concluded that it is appropriate to prepare the financial statements on a going concern basis.

 

Progress on Strategic Projects

 

Newsroom of the Future

Re-engineering our newsrooms to better equip us to cope with the demands of reporting in the modern age is nearing completion, over 88% of our newsrooms are now working with the Newsroom of the Future approach. Teams have new workflows, technology & tools to improve productivity and audience engagement whilst reducing costs. To date, there have been 1,000 people involved and we are seeing an improvement of 14.9% in unique users.

 

Salesforce of the Future

We will restructure our sales team to ensure retention of high yielding customers, acquisition of new high potential customers and the provision of a cost-effective model to serve low yielding customers. These plans are at an advanced stage and will commence roll out in Q4 2015 with a view to delivering a step change in performance in 2016.

 

 

Outlook

As highlighted in the trading update of 14 July 2015, as a result of the off-trend trading in the second quarter, the business enters the second half from a lower base than planned.  The advertising revenue results for July 2015 down 7.7% represent an improvement on the rate of decline in Q2 2015. We believe in our strategy and are confident that our transformation projects will position the Group well for the future.

 

 

Responsibility Statement

 

The directors confirm that to the best of our knowledge:

 

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

 

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

By order of the Board,

 

 

Ashley Highfield

Chief Executive Officer

11 August 2015       

David King

Chief Financial Officer

11 August 2015       

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

 

Address of Registered office

Johnston Press plc,

Orchard Brae House

30 Queensferry Road

Edinburgh

EH4 2HS

 

 

 

26 weeks to 4 July 2015

26 weeks to 28 June 2014

53 weeks to 3 January 2015

 

 

Before exceptional items

Exceptional items2

Total

Before exceptional items

Exceptional items

Total

Before exceptional items

Exceptional items

Total

 

Notes

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

3(a)

128,871

-

128,871

135,811

-

135,811

268,823

-

268,823

Cost of sales

 

(70,827)

-

(70,827)

(76,884)

-

(76,884)

(151,759)

-

(151,759)

Gross profit

 

58,044

-

58,044

58,927

-

58,927

117,064

-

117,064

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

4

(31,646)

(4,156)

(35,802)

(31,090)

(2,919)

(34,009)

(61,612)

(20,204)

(81,816)

Impairment

 

-

-

-

-

-

-

-

(24,535)

(24,535)

Total operating expenses

 

(31,646)

(4,156)

(35,802)

(31,090)

(2,919)

(34,009)

(61,612)

(44.739)

(106,351)

 

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss)

 

26,398

(4,156)

22,242

27,837

(2,919)

24,918

55,452

(44,739)

10,713

 

 

 

 

 

 

 

 

 

 

 

Financing

 

 

 

 

 

 

 

 

 

 

Investment income

5

762

-

762

50

-

50

2,209

-

2,209

Net finance expense on pension liabilities/assets1

6(a)

(1,504)

-

(1,504)

(1,750)

-

 

(1,750)

(3,330)

-

(3,330)

Change in fair value of borrowings

6(b)

(9,333)

-

(9,333)

(563)

-

(563)

5,063

-

5,063

Change in fair value of hedges

6(b)

-

-

-

(1,353)

-

(1,353)

(1,267)

-

(1,267)

Retranslation of debt

6(b)

-

-

-

2,929

-

2,929

2,929

-

2,929

Finance costs

6(c)

(9,987)

-

(9,987)

(21,483)

(9,046)

(30,529)

(31,187)

(9,046)

(40,233)

Total financing costs

 

(20,062)

-

(20,062)

(22,170)

(9,046)

(31,216)

(25,583)

(9,046)

(34,629)

 

 

 

 

 

 

 

 

 

 

 

Profit /(loss) before tax

 

6,336

(4,156)

2,180

5,667

(11,965)

(6,298)

29,869

(53,785)

(23,916)

 

 

 

 

 

 

 

 

 

 

 

Tax

7

(1,284)

610

(674)

1,190

2,485

3,675

(2,847)

11,427

8,580

Profit/(loss) from continuing operations

 

5,052

(3,546)

1,506

6,857

(9,480)

(2,623)

27,022

(42,358)

(15,336)

Net profit/(loss) from discontinued operations1

8

 

(2)

 

 

-

 

(2)

 

 

366

 

 

-

 

366

 

 

203

 

33

 

236

Consolidated profit/ (loss) for the period

 

5,050

(3,546)

1,504

7,223

(9,480)

(2,257)

27,225

(42,325)

(15,100)

1Comparative income statement information has been restated to show the Republic of Ireland business as a discontinued operation due to its disposal on 1 April 2014.

2Items which are deemed to be non-recurring by virtue of their nature or size. Refer to note 4.

 

 

 

 

26 weeks to 4 July 2015

26 weeks to 28 June 2014

53 weeks to 3 January 2015

 

 

Before exceptional items

Exceptional items

Total

Before exceptional items

Exceptional items

Total

Before exceptional items

Exceptional items

Total

 

Notes

 

 

 

 

 

 

 

 

 

From continuing and discontinued operations

9

 

 

 

 

 

 

 

 

 

Earnings per share (p)

 

 

 

 

 

 

 

 

 

 

Basic

 

4.73

(3.36)

1.43

0.29

(0.38)

(0.09)

0.77

(1.20)

(0.43)

Diluted

 

4.73

(3.36)

1.43

0.29

(0.38)

(0.09)

0.77

(1.20)

(0.43)

 

 

 

 

 

 

 

 

 

 

 

From continuing operations

9

 

 

 

 

 

 

 

 

 

Earnings per share (p)

 

 

 

 

 

 

 

 

 

 

Basic

 

4.73

(3.36)

1.43

0.28

(0.38)

(0.11)

0.76

(1.20)

(0.44)

Diluted

 

4.73

(3.36)

1.43

0.28

(0.38)

(0.11)

0.76

(1.20)

(0.44)

 

 

 

 

Notes

Revaluation reserve

Translation

reserve

Retained

earnings

 

Total

 

 

£'000

£'000

£'000

£'000

Profit for the period

 

-

-

1,504

1,504

 

 

 

 

 

 

Items that will not be reclassified subsequently to profit or loss :

 

 

 

 

 

Actuarial gain on defined benefit pension schemes (net of tax) 2

15 

-

-

995

995

 

 

-

-

2,499

2,499

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss :

 

 

 

 

 

Revaluation adjustment

 

-

-

-

-

Exchange differences on translation of foreign operations1

 

-

(283)

-

(283)

Deferred tax on exchange differences

 

-

-

-

-

 

 

-

(283)

-

(283)

 

 

 

 

 

 

Total comprehensive income for the period

 

-

(283)

2,499

2,216

1 Movements in the translation reserve relate to the translation of interests in dormant Irish subsidiaries.

 

Consolidated statement of comprehensive income for the 26 week period ended 28 June 2014

 

 

 

Revaluation reserve

Translation reserve

Retained earnings

Total

 

Notes

£'000

£'000

£'000

£'000

Loss for the period

 

-

-

(2,257)

(2,257)

 

 

 

 

 

 

Items that will not be reclassified subsequently to profit or loss :

 

 

 

 

 

Actuarial loss on defined benefit pension schemes (net of tax)

15 

-

-

(9,718)

(9,718)

 

 

-

-

(11,975)

(11,975)

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss :

 

 

 

 

 

Revaluation adjustment

 

(2)

-

2

-

Exchange differences on translation of foreign operations1

 

-

16

-

16

Deferred tax on exchange differences

 

-

(7)

-

(7)

 

 

(2)

9

2

9

 

 

 

 

 

 

Total comprehensive loss for the period

 

(2)

9

(11,973)

(11,966)

1 Movements in the translation reserve relate to the translation of interests in dormant Irish subsidiaries.

 

 

 

 

 

Share capital

Share premium

Share-based payments reserve

 

 

Revaluation reserve

Own shares

 

 

Translation reserve

 

 

Retained earnings

 

 

 

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balances

116,171

587,702

13,780

1,733

(5,206)

9,565

(523,764)

199,981

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

-

(283)

2,499

2,216

 

 

 

 

 

 

 

 

 

Recognised directly in equity :

 

 

 

 

 

 

 

 

Dividends (Note 10)

-

-

-

-

-

-

(76)

(76)

Share capital reduction (Note 16b)

-

(275,000)

-

-

-

-

275,000

-

Provision for share-based payments (Note 17)

-

-

802

-

-

-

-

802

Options exercised

-

-

(339)

-

348

-

-

9

Purchase of own shares (Note 17)

-

-

-

-

(895)

-

-

(895)

Release on exercise of share warrants

-

-

-

-

-

-

-

-

Net change directly in equity

-

(275,000)

463

-

(547)

-

274,924

(160)

Total movements

-

(275,000)

463

-

(547)

(283)

277,423

2,056

Equity at end of the period

116,171

312,702

14,243

1,733

(5,753)

9,282

(246,341)

202,037

 

 

Consolidated statement of changes in equity for the 26 week period ended 28 June 2014

 

 

 

 

Share capital

Share premium

Share-based payments reserve

 

 

Revaluation reserve

Own shares

 

 

Translation reserve

 

 

Retained earnings

 

 

 

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balances

69,541

502,829

13,576

1,737

(5,312)

9,579

(494,867)

97,083

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the period

-

-

-

(2)

-

9

(11,973)

(11,966)

 

 

 

 

 

 

 

 

 

Recognised directly in equity :

 

 

 

 

 

 

 

 

Dividends (Note 10)

-

-

-

-

-

-

-

-

Provision for share-based payments (Note 17)

-

-

131

-

-

-

-

131

Share capital issued (Note 16a)

46,630

-

-

-

-

-

-

46,630

Share premium arising (Note 16b)

-

84,869

-

-

-

-

-

84,869

Options exercised

-

-

-

-

8

-

-

8

Release on exercise of share warrants

-

-

(601)

-

-

-

601

-

Net change directly in equity

46,630

84,869

(470)

-

8

-

601

131,638

Total movements

46,630

84,869

(470)

(2)

8

9

(11,372)

119,672

Equity at end of the period

116,171

587,698

13,106

1,735

(5,304)

9,588

(506,239)

216,755

 

 

 

 

 

4 July 2015

28 June 2014

3 January 2015

 

Notes

£'000

£'000

£'000

Non-current assets

 

 

 

 

Goodwill

11

85

-

-

Intangible assets

11

515,258

537,436

514,324

Property, plant and equipment

12a

53,457

52,777

53,334

Available for sale investments

 

970

970

970

Interests in associates

 

22

22

22

Trade and other receivables

 

1

4

2

Derivative financial instruments

13

-

-

-

 

 

569,793

591,209

568,652

 

 

 

 

 

Current assets

 

 

 

 

Assets classified as held for sale

12b

937

2,389

1,301

Inventories

 

2,173

2,080

2,543

Trade and other receivables

 

37,748

44,885

37,677

Cash and cash equivalents

 

41,687

39,452

30,817

Derivative financial instruments

13

-

15

-

 

 

82,545

88,821

72,338

Total assets

 

652,338

680,030

640,990

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

49,545

61,108

46,908

Current tax liabilities

 

1,397

1,687

1,032

Retirement benefit obligation

15

6,489

6,300

6,489

Borrowings

14

-

-

-

Short-term provisions

 

1,703

1,604

2,087

 

 

59,134

70,699

56,516

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

14

224,771

221,063

215,437

Retirement benefit obligation

15

80,574

80,638

83,512

Deferred tax liabilities

 

81,969

86,690

81,352

Trade and other payables

 

-

133

2

Long-term provisions

 

3,853

4,052

4,190

 

 

391,167

392,576

384,493

Total liabilities

 

450,301

463,275

441,009

Net assets

 

202,037

216,755

199,981

 

 

 

 

 

Equity

 

 

 

 

Share capital

16a

116,171

116,171

116,171

Share premium account

16b

312,702

587,698

587,702

Share-based payment reserve

17

14,243

13,106

13,780

Revaluation reserve

 

1,733

1,735

1,733

Own shares

 

(5,753)

(5,304)

(5,206)

Translation reserve

 

9,282

9,588

9,565

Retained earnings

 

(246,341)

(506,239)

(523,764)

Total equity

 

202,037

216,755

199,981

 

 

 

 

26 weeks to

26 weeks to

53 weeks to

 

 

4 July 2015

28 June 2014

3 January 2015

 

Notes

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Cash generated/(used in) from operations

18 

24,983

(2,465)

6,318

Income tax received/(paid)

 

-

918

918

Cash (used in)/generated from discontinued operations

 

(212)

678

571

Net cash inflow/(outflow) from operating activities

 

24,771

(869)

7,807

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

59

19

49

Dividends received

 

703

31

2,160

Proceeds on disposal of publishing titles

 

-

-

-

Proceeds on disposal of property, plant and equipment

 

117

6,251

484

Proceeds on disposal of assets held for sale

 

628

-

7,612

Expenditure on digital intangible assets

 

(1,096)

(1,748)

(1,513)

Purchases of property, plant and equipment

 

(3,246)

(2,015)

(7,149)

Acquisition of publishing title

 

(60)

-

-

Disposal proceeds and investing activities of discontinued operations

 

-

6,473

5,882

Net cash (used in)/provided by investing activities

 

(2,895)

9,011

7,525

 

 

 

 

 

Financing activities

 

 

 

 

Issuance of bonds

 

-

220,500

220,500

Placing and rights issue

16a,16b 

-

140,680

140,022

Share exercises - option schemes, warrants1

 

-

-

662

Dividends paid

 

(228)

-

-

Interest paid

 

(9,890)

(16,546)

(27,008)

Repayment of bank borrowings

 

-

(204,738)

(204,738)

Repayment of loan notes

 

-

(121,798)

(121,798)

Refinancing fees

 

-

(15,611)

(21,100)

Purchase of foreign currency options

 

-

(260)

(159)

Purchase of own shares

17  

(888)

-

-

Cash movement relating to own shares held

 

-

8

29

Net cash (used in)/provided by financing activities

 

(11,006)

2,235

(13,590)

Net increase in cash and cash equivalents

 

10,870

10,377

1,742

Cash and cash equivalents at beginning of period

 

30,817

29,075

29,075

Cash and cash equivalents at end of period

 

41,687

39,452

30,817

 

 

1Share options and share warrant exercises generated a net cash inflow of £658,000. Issue of share capital generated £594,000 and issue of share premium generated £64,000. Also includes proceeds from fractional shares (refer to Note 28 of the 3 January 2015 published financial statements for further details).

 

 

1. General Information

The condensed financial information for the 26 weeks to 4 July 2015 does not constitute statutory accounts for the purposes of Section 434 of the Companies Act 2006 and has not been audited. No statutory accounts for the period have been delivered to the Registrar of Companies. This interim financial report constitutes a dissemination announcement in accordance with Rule 6.3 of the Disclosure and Transparency Rules of the United Kingdom Listing Authority.

 

The condensed financial information in respect of the 53 weeks ended 3 January 2015 has been produced using extracts from the statutory accounts for this period. Consequently, this does not constitute the statutory information (as defined in section 434 of the Companies Act 2006) for the 53 weeks ended 3 January 2015, which was audited. The statutory accounts for this period have been filed with the Registrar of Companies. The auditor's report was unqualified and did not contain a statement under Sections 498 (2) or 498 (3) of the Companies Act 2006.

 

The next annual financial statements of the Group for the 52 weeks to 2 January 2016 will be prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'. The financial information in this Interim Report has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules and Disclosure and Transparency Rules. The auditor has reviewed the financial information in this Interim Report and their report is set out on page 35.

 

The Interim Report was approved by the Directors on 11 August 2015 and is being made available to shareholders on the same date on the Company's website at www.johnstonpress.co.uk.

 

 

2. Accounting Policies

Basis of Preparation

The interim financial information has been prepared on the historical cost basis, except for the revaluation of certain properties, pension balances and financial instruments including borrowings. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.

 

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the unaudited condensed consolidated interim financial statements.

 

In June 2014 the Company completed its Capital Refinancing Plan. Gross proceeds of £140.0 million were received through the Placing and Rights Issue and gross proceeds of £220.5 million were received from the bond of £225.0 million 8.625% senior secured notes due 2019 at a discount of £4.5 million. In addition, the Company entered into a 4 year and 6 month £25 million Super Senior Revolving Facility Agreement ("RCF") which remains undrawn. Under the RCF, the Group has one financial covenant, measured quarterly, requiring the achievement of a specified ratio of consolidated leverage to consolidated EBITDA for the last 12 months. The Company is operating with headroom on the covenants.

 

 

Basis of Accounting

The financial statements have been prepared on the basis of the significant accounting policies set out in the financial statements for the 53 week period ended 3 January 2015 with the exception of the adoption of new or amended standards and interpretations in the current year as follows:

 

The following new and amended IFRSs have been adopted for the 26 week period which commenced 3 January 2015 to 4 July 2015:

 

Accounting standard

Requirements

Impact on financial statements

IFRIC 21 Levies

Clarifies how an entity should account for liabilities to pay levies imposed by governments.

None; Refer to Pensions disclosures in relation to PPF and Section 75 levies recognised in the income statement in prior periods.

Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions

Introduces a narrow-scope amendment to simplify the accounting for contributions that are independent of the number of years of employee service eg, employee contributions that are calculated according to a fixed percentage of salary.

None; Refer to Pensions disclosures.

Annual improvements to IFRSs 2010-2012 cycle

Minor amendments to IFRS 2, 3, 8, 13 and IAS 16 and 38 and IAS 24.

None; Minor revisions taken into consideration when applying standards.

Annual improvements to IFRSs 2011-2013 cycle

Minor amendments to IFRS 1, 3, 13 and IAS 40.

None; Minor revisions taken into consideration when applying standards.

 

There are numerous standards which have a mandatory application date of on or after 1 January 2016, the details of which will be assessed in further detail during the course of the year and disclosed in the annual financial statements.  No significant changes are however envisaged as a result of their application.

 

2. Accounting Policies (continued)

 

Critical Accounting judgements and Key Sources of Estimation Uncertainty

 

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Exceptional items

Exceptional items include significant transactions such as the costs associated with restructuring of businesses (including redundancy and business transformation consultancy costs) along with material items including for example significant pension related costs, the disposal or exit of a significant property directly linked to restructuring, one time incentive plans or Value Creation Plan and impairment of intangible and tangible assets together with the associated tax impact. The Company considers such items are material to the Income Statement and their separate disclosure is necessary for an appropriate understanding of the Group's financial performance.  These items have been presented as a separate column in the Group Income Statement.

Valuation of publishing titles on acquisition

The Group's policies require that a fair value at the date of acquisition be attributed to the publishing titles owned by each acquired entity. The Group's management uses its judgement to determine the fair value attributable to each acquired publishing title taking into account the consideration paid, the earnings history and potential of the title, any recent similar transactions, industry statistics such as average earnings multiples and any other relevant factors.

The publishing titles are considered to have indefinite economic lives due to the historic longevity of the brands and the ability to evolve the brands in the changing media environment.

Valuation of share-based payments

The Group estimates the expected value of equity-settled share-based payments and this is charged through the Income Statement over the vesting periods of the relevant awards. The cost is estimated using a Black-Scholes valuation model. The Black-Scholes calculations are based on a number of assumptions that are set out in Note 31 of the 3 January 2015 financial statements, and are amended to take account of estimated levels of share vesting and exercise.

Provisions for onerous leases and dilapidations

Where the Group exits a rented property, an estimate of the anticipated total future cost payable under the terms of the operating lease, including rentals, rates and other related expenses, is charged to the Income Statement at the point where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Where there is a break clause in the contract, rentals are provided for up to that point. In addition, an estimate is made of the likelihood of sub-letting the premises and any rentals that would be receivable from a sub-tenant. Where receipt of sub-lease rentals is considered reasonable, these amounts are deducted from the rentals payable by the Group under the lease and provision charged for the net amount.

Under the terms of a number of property leases, the Group is required to return the property to its original condition at the lease expiry date. The Group has estimated the expected costs of these dilapidations and charged these costs to the Income Statement. No discounting has been applied to the provision as the effect of the discounting is not considered material.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the period end date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are discussed below.

Impairment of publishing titles and print presses

Determining whether publishing titles are impaired requires an estimation of the value in use of the cash generating units (CGUs) to which these assets are allocated. Key areas of judgement in the value in use calculation include the identification of appropriate CGUs, estimation of future cash flows expected to arise from each CGU, the long-term growth rates and a suitable discount rate to apply to cash flows in order to calculate present value. The Group has identified its CGUs based on the six geographic regions in which it operates. This is considered to be the lowest level at which cash inflows generated are largely independent of the cash inflows from other groups of assets and has been consistently applied in the current and prior periods. At the interim period an impairment review has been undertaken resulting in a reduction of headroom however, no impairment charge is considered necessary for recognition in the period (28 June 2014: nil, 3 January 2015: £21.6m). The carrying value of publishing titles at 4 July 2015 was £511.6 million (28 June 2014: £533.1m; 3 January 2015: £511.6m). Details of the impairment reviews that the Group performs are provided in Note 11.

Determining whether print presses are impaired requires an estimation of the value in use of each print site. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the print sites and a suitable discount rate in order to calculate present value.

Valuation of pension liabilities

The Group records in its Statement of Financial Position a liability equivalent to the greater of the deficit on the Group's defined benefit pension schemes or the discounted value of agreed future contributions required under IFRIC14. This liability is determined with advice from the Group's actuarial advisers each year and can fluctuate based on a number of factors, some of which are outside the control of management. The main factors that can impact the valuation include:

·     the discount rate used to discount future liabilities back to the present date, determined from the yield on corporate bonds;

·     the actual returns on investments experienced as compared to the expected rates used in the previous valuation;

·     the actual rates of salary and pension increase as compared to the expected rates used in the previous valuation;

·     the forecast inflation rate experienced as compared to the expected rates used in the previous valuation; and

·     mortality assumptions.

 

Details of the assumptions used to determine the liability at 4 July 2015 are set out in Note 15.

 

 

3. Business Segments

Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance is focused on the two operating segments of Publishing (in print and online) and Contract Printing. These are the only two operating segments of the Group.

 

a) Segment Revenues and Results

 

 

Publishing

Contract printing

Eliminations

Group

26 weeks period ended 4 July 2015

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

Print advertising

64,112

-

-

64,112

Digital advertising

16,527

-

-

16,527

Newspaper sales

37,557

-

-

37,557

Contract printing

-

6,247

-

6,247

Other

3,564

864

-

4,428

Total external sales

121,760

7,111

-

128,871

Inter-segment sales1

-

16,008

(16,008)

-

Exceptional items

-

-

-

-

Total revenue

121,760

23,119

(16,008)

128,871

 

 

 

 

 

Operating profit/(loss)

 

 

 

 

Segment result before exceptional items

25,018

1,380

-

26,398

Exceptional items

(3,806)

(350)

-

(4,156)

Net segment result

21,212

1,030

-

22,242

 

 

 

 

 

Investment income

 

 

 

762

Net finance expense on pension liabilities/assets

 

 

 

(1,504)

Change in fair value of borrowings2

 

 

 

(9,333)

Net finance costs

 

 

 

(9,987)

Share of result of associates

 

 

 

-

Profit before tax

 

 

 

2,180

Tax

 

 

 

(674)

Profit after tax for the period - continuing operations

 

 

 

1,506

Loss after tax for the period - discontinued operations

 

 

 

(2)

Consolidated Profit after tax for the period

 

 

 

1,504

1Inter segment sales are charged at prevailing market prices.

2Relates to changes in fair value of hedges, retranslation of USD and retranslation of Euro denominated debt.

 

 

Publishing

Contract printing

Eliminations

Group

26 weeks period ended 28 June 2014

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

Print advertising

70,853

-

-

70,853

Digital advertising

14,068

-

-

14,068

Newspaper sales

39,720

-

-

39,720

Contract printing

-

6,314

-

6,314

Other

4,099

757

-

4,856

Total external sales

128,740

7,071

-

135,811

Inter-segment sales1

-

19,089

(19,089)

-

Exceptional items

-

-

-

-

Total revenue

128,740

26,160

(19,089)

135,811

 

 

 

 

 

Operating (loss)/profit

 

 

 

 

Segment result before exceptional items

26,140

1,697

-

27,837

Exceptional items

(2,765)

(154)

-

(2,919)

Net segment result

23,375

1,543

-

24,918

 

 

 

 

 

Investment income

 

 

 

50

Net finance expense on pension liabilities/assets

 

 

 

(1,750)

Net IAS 21/39 adjustments2

 

 

 

1,013

Net finance costs

 

 

 

(30,529)

Share of result of associates

 

 

 

-

 

 

 

(6,298)

Tax

 

 

 

3,675

Loss after tax for the period - continuing operations

 

 

 

(2,623)

Profit after tax for the period - discontinued operations

 

 

 

366

Consolidated loss after tax for the period

 

 

 

(2,257)

1Inter segment sales are charged at prevailing market prices.

2Relates to changes in fair value of hedges, retranslation of USD and retranslation of Euro denominated debt.

 

 

The accounting policies of the reportable segments are the same as the Group's accounting policies described in the Group's annual consolidated financial statements for the 53 weeks to 3 January 2015. Segment result represents the profit earned by each segment without allocation of the share of results of associates, investment income, finance costs (including in relation to pension assets and liabilities) and income tax expense. This is the measure reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance.

 

The Group, in common with the rest of the publishing industry, is subject to the main holiday periods of Easter, summer and Christmas as well as school and bank holidays. Since these fall across both half years, the Group's financial results are not usually subject to significant seasonal variations.

 

b) Segment Assets

 

 

 

4 July 2015

28 June 2014

3 January 2015

 

Notes

£'000

£'000

£'000

Assets

 

 

 

 

Publishing

 

620,123

646,466

609,452

Contract printing

 

32,215

33,549

31,538

Total segment assets

 

652,338

680,015

640,990

Unallocated assets

 

-

15

-

Consolidated total assets

 

652,338

680,030

640,990

 

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of available-for-sale investments and derivative financial instruments.

 

c) Other Segment Information

 

 

26 weeks to 4 July 2015

26 weeks to 28 June 2014

53 weeks to 3 January 2015

 

Publishing

Contract printing

Group

Publishing

Contract printing

Group

Publishing

Contract printing

Group

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Additions to property, plant and equipment

 

2,698

548

3,246

1,987

28

2,015

7,044

105

7,149

Depreciation expense

 

1,758

1,242

3,000

1,883

819

2,702

3,869

1,638

5,507

Impairment of property, plant and equipment

 

-

-

-

-

-

-

2,667

-

2,667

Impairment of intangibles

-

-

-

-

-

-

21,568

-

21,568

 

 

4. Exceptional Items

Exceptional items included with the Group Income Statement are:

 

 

 

26 weeks to

4 July 2015

26 weeks to

28 June 2014

53 weeks to

3 January 2015

 

Notes

£'000

£'000

£'000

 

 

 

 

 

Operating expenses

 

 

 

 

Pensions

 

 

 

 

  Plan expenses

15

-

(380)

(380)

  Pension protection fund contribution

 

(859)

(680)

(2,038)

  Section 75 pension debt

 

-

-

-

  Newspaper Society Pension Scheme

 

-

-

(873)

Restructuring costs

 

(2,390)

(2,315)

(10,896)

One-off incentive plans

 

-

-

(4,321)

Value creation plan

17

(463)

-

(231)

Gain on disposal

 

-

860

869

Other

 

(444)

(404)

(2,334)

Total exceptional operating expenses

 

(4,156)

(2,919)

(20,204)

 

 

 

 

 

Impairment of :

 

 

 

 

Intangible assets

 

-

-

(21,568)

Property, plant and equipment

 

-

-

(2,667)

Assets held for sale

 

-

-

(300)

Total exceptional impairment

 

-

-

(24,535)

 

 

 

 

 

Total exceptional finance costs

6c

-

(9,046)

(9,046)

 

 

 

 

 

Net exceptional items

 

(4,156)

(11,965)

(53,785)

Taxation on exceptional items

 

610

2,485

11,427

Total exceptional items after tax

 

(3,546)

(9,480)

(42,358)

 

 

Operating expenses - pensions          

The Pension Protection Fund levy is estimated to be £0.7m for the year ending 31 March 2016 (2014/2015 invoice: £2.7million). In the event that the 2015/2016 PPF levy is less than £3.2 million, the Group will also pay additional contributions to the Johnston Press Pension Plan equal to the amount the levy falls below £3.2 million, up to a maximum of £2.5 million. Refer note 15.  Historically, the pension levy was charged at the capped rate, reflecting historic high gearing.  The charge is expected to fall in 2015 reflecting the reduced gearing and actions to optimise flexible apportionment. 

 

In the period there are no exceptional pension plan expenses, in the prior year additional administration expenses of £0.4 million were incurred in connection with refinancing.

 

In the prior year, the Group recognised £0.9 million charge reflecting commitment over the next 24 years to address the deficit of the Newspaper Society's defined benefit pension scheme.  At the half-year a provision is held on the balance sheet for the remaining unpaid commitment.

 

Operating expenses - restructuring costs                        

Restructuring costs primarily relate to reorganisation including redundancy and business transformation programme costs.  In the prior year other restructuring costs include early lease termination costs, empty property costs, dilapidations, and other associated legal and consulting fees and dual-running office costs.

 

Operating expenses - incentive plans

A £0.5 million charge non-cash for the value creation plan was incurred in the period, (3 January 2015: £0.2 million). The prior year includes a one time refinancing bonus, payable in March 2016 aimed at incentivisation and retention of senior managers (3 January 2015: £3.9 million) and a one-off bonus opportunity made available to the Executive Directors (3 January 2015: £0.4 million).

 

Operating expenses - gain on disposal                             

In the period there were no exceptional gains on disposal.  In the prior year, in line with Group policy, disposal gains of £0.8 million were recognised in exceptional items and a £0.1 million gain on disposal of print press equipment. 

 

Within operating profit, a net gain of £0.3m (28 June 2014: £0.5m gain, 3 January 2015: £1.0 million gain) from several property and vehicle disposals was reported in the period; this is in line with Group policy.

 

Operating expenses - other                

The Group incurred other operating expenses of £0.4 million (28 June 2014: £0.4 million, 3 January 2015: £2.3 million) relating to professional fees for corporate strategy review and aborted and other disposals and one-off trade obligations. 

 

Impairment of intangible assets, property, plant and equipment and assets held for sale                        

In the period there was no impairment of intangible assets (3 January 2015: £21.5 million), and no write-downs in the value of presses or property assets in the period (3 January 2015: £2.9 million).

 

Finance costs

There are no exceptional finance costs in the period.  In the prior year the exceptional finance costs were incurred in relation to the refinancing, refer to the 2014 Annual report for further detail.

 

Tax-effect of exceptional items

The Group has disclosed a £0.6 million tax credit (28 June 2014: £2.5m, 3 January 2015: £11.4m) in relation to the total exceptional items of £4.2 million (28 June 2014: £12.0m, 3 January 2015: £53.8m)

 

 

5. Investment Income

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Income from available for sale investments

 

703

-

2,109

Income from other investments

 

-

31

51

Interest receivable

 

59

19

49

 

 

762

50

2,209

 

 

6. Finance Costs

a) Net Finance Expense on Pension Liabilities/Assets

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Interest on assets

 

8,389

9,590

19,376

Interest on liabilities

 

(9,893)

(11,340)

(22,706)

Net finance expense on pension liabilities/assets

15

(1,504)

(1,750)

(3,330)

 

 

 

 

 

             

 

b) Fair value adjustment

In the period the market price of the 8.625% Senior Secured Bonds 2019 traded up from the ask price at 3 January 2015 of 95.750% to 99.898% at 4 July 2015 (28 June 2014: 98.250%). This resulted in an adjustment to the value of the bond and charge to the income statement of £9.3 million (28 June 2014: £0.6 million loss; 3 January 2015: £5.1million gain). Refer to note 14.

 

c) Finance Costs

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Interest on bond

 

(9,703)

(2,286)

(12,290)

Interest on bank overdrafts and loans

 

(187)

(11,561)

(11,163)

Payment-in-kind interest

 

-

(5,345)

(5,345)

Amortisation of term debt issue costs

 

(97)

(2,291)

(2,389)

Total operational finance costs

 

(9,987)

(21,483)

(31,187)

 

 

 

 

 

Interest accrual release

 

-

9,181

9,181

Term debt issue costs

 

-

(7,145)

(7,145)

Gain on debt extinguishment

 

-

2,036

2,036

 

 

 

 

 

Refinancing fees

 

-

(11,082)

(11,082)

 

 

 

 

 

Total exceptional finance costs

 

-

(9,046)

(9,046)

 

 

 

 

 

Total finance costs

 

(9,987)

(30,529)

(40,233)

 

7. Tax

The tax charge/(credit) comprises:

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

 

 

 

 

 

Current tax

 

 

 

 

Corporation tax charge

 

75

-

-

Adjustment in respect of prior periods

 

253

-

(665)

Total Current tax charge / (credit)

 

328

-

(665)

 

 

 

 

 

Deferred tax

 

 

 

 

Deferred tax charge / (credit)

 

346

(3,675)

(7,915)

Total Deferred tax charge / (credit)

 

346

(3,675)

(7,915)

 

 

 

 

 

Total tax charge / (credit)

 

674

(3,675)

(8,580)

 

 

 

 

 

Reconciliation of tax charge / (credit)

 

%

%

%

Standard rate of corporation tax

 

20.3

(21.5)

(21.5)

Tax effect of items that are not deductible or not taxable in determining taxable profit

 

 

0.4

 

(35.7)

 

(12.8)

Unrecognised deferred tax assets

 

-

-

1.5

Prior period adjustment

 

2.3

-

(2.8)

Effect of other tax rates

 

(1.5)

(1.1)

(0.3)

Tax charge / (credit) rate

 

21.5

(58.3)

(35.9)

 

Corporation tax for the interim period is charged at 21.5% (28 June 2014: credited at 58.3%, 3 January 2015: credited at 35.9%), including deferred tax, this represents the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period.

 

The basic rate tax applied for the 2015 period of 20.25% (2014: 21.5%) was a blended rate due to the tax rate of 21% in effect for the first quarter of 2015, changing to 20% from 1 April 2015 under the 2013 Finance Act. (2014: 23% in effect for first quarter and 21% from 1 April 2014). Note 4 includes details of tax effect on exceptionals.

 

The calculation of the tax charge for the period includes the increase or decrease in the bond mark to market valuation. Refer to note 6b.

 

Legislation was introduced in the Summer Finance Bill 2015 to reduce the main rate of corporation tax from 20% to 19% from 1 April 2017 and 18% from 1 April 2020. The impact of deferred tax re-measurement should be recorded when the legislation is substantively enacted for IFRS purposes.  We expect the Finance Bill to be substantively enacted in September 2015. As this is after the Interim balance sheet date, adjustment is not required for the purposes of the estimated annual effective tax rate.

 

8. Discontinued operations

There were no activities discontinued in the period. 

 

·     On 1 April 2014 the Group completed the disposal of the Republic of Ireland titles to Iconic Newspapers, part of Mediaforce Limited, for a cash consideration of £7.1 million.  For full details of the transaction refer to note 12 of the 3 January 2015 financial statements.

·     In October 2014 the activities of the Letterbox free title and leaflet distribution business were outsourced to Mediaforce.  They were not considered material for the purposes of disclosure as discontinued business however they have been disclosed as an "underlying adjustment" in the 26 week period end 4 July 2015 financial statements.

 

9. Earnings Per Share

The calculation of earnings per share is based on the following profits/(losses) and weighted average number of shares:

 

Continuing and discontinued operations

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Earnings

 

 

 

 

Profit/(loss) for the period

 

1,504

(2,257)

(15,100)

Preference dividend1

 

(76)

-

(152)

Earnings for the purposes of basic and diluted earnings per share

 

1,428

(2,257)

(15,252)

Exceptional items (after tax)

 

3,546

9,480

42,325

Underlying adjustments³

 

9,142

2,313

(1,613)

Earnings for the purposes of underlying earnings per share

 

14,116

9,536

25,460

 

 

 

000's

000's

000's

Number of shares

 

 

 

 

Weighted average number of ordinary shares for the purpose of basic earnings per share and diluted earnings per share2

 

105,273

2,464,161

3,519,924

 

 

 

Pence

Pence

Pence

Earnings per share (p)

 

 

 

 

Basic

 

1.43

(0.09)

(0.43)

Underlying³

 

13.41

0.39 

0.72 

Diluted4

 

1.43

(0.09)

(0.43)

 

Based on the current share price  18,081,000 outstanding shares will not crystalise and no dilution is reflected.

 

1 In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of earnings per share.

2 The weighted average number of ordinary shares are shown excluding share held by the company's employee benefit trust.

3 Underlying figures are presented to show the effect of excluding exceptional items and other underlying adjustments from earnings per share. Underlying adjustments have been included in prior period comparatives to allow consistent reporting of EPS for underlying purposes.

4 Diluted earnings per share are presented when a company could be called upon to issue shares that would decrease net profit or increase loss per share.

 

 

 

000's

000's

000's

Weighted average number of ordinary shares for the purpose of basic earnings per share and diluted earnings per share2

 

105,273

2,464,161

3,519,924

Effect of dilutive potential ordinary shares assuming all outstanding shares vest:

 

 

 

 

-       warrants and employee share options

 

18,081

145,991

14,472

Number of shares for the purposes of diluted earnings per share

 

123,354

2,610,152

3,534.396

 

 

 

Pence

Pence

Pence

Earnings per share (p)

 

 

 

 

Proforma Underlying fully diluted5

 

11.44

0.37

0.72

5 The fully diluted position assumes all outstanding existing shares vest in full.

 

9. Earnings Per Share (continued)

Continuing operations

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Earnings

 

 

 

 

Profit/(loss) for the period

 

1,506

(2,623)

(15,336)

Preference dividend1

 

(76)

-

(152)

Earnings for the purposes of basic and diluted earnings per share

 

1,430

(2,623)

(15,488)

Exceptional items (after tax)

 

3,546

9,480

42,358

Underlying adjustments³

 

9,142

2,313

(1,613)

Earnings for the purposes of underlying earnings per share

 

14,118

9,170

25,257

 

 

 

000's

000's

000's 

Number of shares

 

 

 

 

Weighted average number of ordinary shares for the purpose of basic earnings per share and diluted earnings per share2

 

105,273

2,464,161

3,519,924

 

 

 

 

 

 

 

Pence

Pence

Pence

Earnings per share (p)

 

 

 

 

Basic

 

1.43

(0.11)

(0.44)

Underlying³

 

13.41

0.37 

0.72 

Diluted4

 

1.43

(0.11)

(0.44)

 

Based on the current share price 18,081,000 outstanding shares will not crystalise and no dilution is reflected.

 

 

1 In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of earnings per share.

2 The weighted average number of ordinary shares are shown excluding share held by the company's employee benefit trust of 0.6 million (0.5 million 3 January 2015).

3 Underlying figures are presented to show the effect of excluding exceptional items and other underlying adjustments from earnings per share. Underlying adjustments have been included in prior period comparatives to allow consistent reporting of EPS for underlying purposes.

4 Diluted earnings per share are presented when a company could be called upon to issue shares that would decrease net profit or increase loss per share.

 

 

 

 

000's

000's

000's 

Weighted average number of ordinary shares for the purpose of basic earnings per share and diluted earnings per share2

 

105,273

2,464,161

3,519,924

Effect of dilutive potential ordinary shares assuming all outstanding shares vest:

 

 

 

 

-       warrants and employee share options

 

18,081

145,991

14,472

Number of shares for the purposes of diluted earnings per share

 

123,354

2,610,152

3,534,396

 

 

 

Pence

Pence

Pence

Earnings per share (p)

 

 

 

 

Proforma Underlying fully diluted5

 

11.44

0.35

0.71

5 The fully diluted position assumes all outstanding existing shares vest in full.

 

10. Dividends

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Amounts recognised as distributions in the period

 

 

 

 

Preference dividends paid

 

76

-

152

 

 

 

 

Pence

Pence

Pence

Dividend paid per share

 

 

 

 

Preference

 

6.88

-

13.75

 

Following the capital reduction in the first half of the year a preference dividend totalling £228,000 was paid. Of this £152,000 had been accrued in the prior period. There were no ordinary dividends proposed but not paid or included in the accounting records in either of the comparative periods shown.  Refer to Note 16a for additional explanations of resolutions made on dividends on preference shares.

 

11. Intangible Assets

 

 

Publishing titles

Digital intangible assets

Goodwill

Total

 

Notes

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

Opening balance

 

1,149,123

3,013

-

1,152,136

Additions

 

-

1,096

85

1,181

Disposals

 

-

-

-

-

Closing balance

 

1,149,123

4,109

85

1,153,317

 

 

 

 

 

 

Accumulated impairment losses and amortisation

 

 

 

 

 

Opening balance

 

637,561

251

-

637,812

Amortisation for the period

 

-

162

-

162

Disposals

 

-

-

-

-

Impairment losses for the period

 

-

-

-

-

Closing balance

 

637,561

413

-

637,973

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

Opening balance

 

511,562

2,762

-

514,324

Closing balance

 

511,562

3,696

85

515,344

 

The carrying amounts of the publishing titles by cash generating unit (CGU) is as follows, and remains unchanged since year end:

 

 

 

4 July 2015

 

 

 

£'000

Scotland

 

 

52,127

North

 

 

217,231

Northwest

 

 

47,860

Midlands

 

 

120,082

South

 

 

38,375

Northern Ireland

 

 

35,887

Total carrying amount of publishing titles

 

 

511,562

 

The Group tests the carrying value of publishing titles held within the publishing operating segment for impairment annually or more frequently if there are indications of a possible triggering event or any potential evidence that they might be impaired. The publishing titles are grouped by CGUs, being the lowest levels for which there are separately identifiable cash flows independent of the cash inflows from other groups of assets.

 

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are:

 

·      the discount rate;

·      expected changes in underlying revenues and direct costs during the period; and

·      growth rates.

 

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The discount rate applied to the future cash flows for the period ended was 12.0% (3 January 2015: 12.0%). The discount rate reflects management's view of the current risk profile of the underlying assets being valued with regard to the current economic environment and the risks that the regional media industry is facing.

 

Changes in underlying revenue and direct costs are based on past practices and expectations of future changes in the market. These include changes in demand for print and digital, circulation, cover prices, advertising rates as well as movement in newsprint and production costs and inflation.

 

Discounted cash flow forecasts are prepared using:

 

·      the most recent financial budgets and projections approved by management updated to reflect current trading trends to the half year and revised estimates for the full 2015 year which reflect management's current experience and future expectations of the markets the CGUs operate in;

·      net cash inflows for future years are extrapolated based on an estimated annual long-term growth rate of 1.0%; and

·      capital expenditure cash flows to reflect the cycle of capital investment required.

 

The present value of the cash flows is then compared to the carrying value of the asset to determine if there is any impairment loss.

 

There was no impairment charge recognised for the period ended 4 July 2015 (3 January 2015: £21.6 million). There has been no change in the carrying value of any CGU's in the period, as values in use remain higher than this respective carrying value.

 

The Group has conducted sensitivity analysis on the impairment test of each CGUs carrying value. A decrease in the long-term growth rate of 0.5% would result in an impairment for the Group of £9.0 million and an increase in the discount rate of 0.5% would result in an impairment of £8.2 million. Applying both sensitivities would result in an impairment being recorded in North and Midlands CGU's.

 

 

Digital intangible assets

Digital intangible assets primarily relate to the Group's local websites and the development of the Customer Relationship Management (CRM) capability. The websites form the core platform for the Group's digital revenue activities whereas the CRM capability will enable the Group to accelerate the growth of its subscriber base. These assets are being amortised over a period of two to five years.  Amortisation for the year has been charged through cost of sales. 

 

Acquisition of publishing titles

On 3 July 2015 Johnston Publishing Limited a subsidiary of Johnston Press plc acquired 100% of the share capital of Love News Media Limited, the publisher of the Brighton & Hove Independent, a free weekly title with a circulation of over 13,000 copies, for a total consideration of £90,000. Of this £30,000 has been deferred and will be settled subject to performance requirements set out in the acquisition agreement. On acquisition the company had net assets of £5,000 and management consider that the remaining £85,000 fair value be attributed to goodwill. The title, including its popular associated website: www.brightonandhoveindependent.co.uk and @BrightonIndy twitter following complements the South portfolio of assets. 

 

12a. Property, Plant & Equipment

 

Freehold

land and

buildings

£'000

Leasehold buildings

£'000

Plant and machinery £'000

Motor

Vehicles

 £'000

Total

£'000

Cost

 

 

 

 

 

At 3 January 2015

60,786

6,132

122,460

2,672

192,050

Additions

-

291

2,955

-

3,246

Acquisitions

-

-

5

-

5

Disposals

-

(27)

(473)

(1,267)

(1,767)

Transferred to/from assets held for sale during the period

(136)

-

(20)

-

(156)

Reclassification

-

(2)

2

-

-

Exchange differences

26

(103)

91

7

21

At 4 July 2015

60,676

6,291

125,020

1,412

193,399

 

 

 

 

 

 

Depreciation

 

 

 

 

 

At 3 January 2015

38,656

2,079

95,309

2,672

138,716

Acquisitions

-

-

2

-

2

Disposals

-

(27)

(460)

(1,267)

(1,754)

Charge for the period

238

165

2,597

-

3,000

Transferred to/from assets held for sale during the period

(31)

-

(20)

-

(51)

Reclassification

-

-

-

-

-

Exchange differences

15

(84)

91

7

29

At 4 July 2015

38,878

2,133

97,519

1,412

139,942

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

At 3 January 2015

22,130

4,053

27,151

-

53,334

At 4 July 2015

21,798

4,158

27,501

-

53,457

 

 

12b. Assets classified as held for sale

The Company held £0.9m assets held for sale at fair value as shown below, the assets held for sale are classified as Level 3 accordingly to IFRS 13. The Directors have estimated the sale values based on the current price that the asset is being marketed at and advice from independent property agents.

 

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

Freehold land and buildings

 

759

2,079

1,114

Leasehold buildings

 

178

125

5

Plant and machinery

 

-

185

182

Carrying amount

 

937

2,389

1,301

 

13. Derivative Financial Instruments

The Group no longer holds any financial derivatives instruments as the remaining derivatives from 28 June 2014 have expired. These financial instruments were classified as Level 2 according to IFRS 13 and were valued with reference to prevailing quoted forward exchange rates of the US Dollar to the British Pound at the balance sheet date, the amount outstanding at 20 June 2014 was £15,000.

 

14. Borrowings

The borrowings at 4 July 2015 are recorded at quoted market fair value and classified as Level 1 according to IFRS 13. As the borrowings are shown at fair value the associated issue costs against the 8.625% Senior secured notes 2019 have been charged to the Income Statement (refer to note 6b). 

 

See below the breakdown of the 8.625% Senior secured notes 2019:

 

4 July 2015

28 June 2014

3 January 2015

 

£'000

£'000

£'000

Principal Amount

225,000

225,000

225,000

Bond discount

(4,500)

(4,500)

(4,500)

Fair value (gain)/loss

4,271

563

(5,063)

Total borrowings

224,771

221,063

215,437

14. Borrowings (continued)

The borrowings are disclosed in the financial statements as:

 

4 July 2015

28 June 2014

3 January 2015

 

£'000

£'000

£'000

Current borrowings

-

-

-

Non-current borrowings

224,771

221,063

215,437

Total borrowings

224,771

221,063

215,437

 

The Group's net debt is:

 

4 July 2015

28 June 2014

3 January 2015

 

£'000

£'000

£'000

Gross borrowings as above

224,771

221,063

215,437

Cash and cash equivalents

(41,687)

(39,452)

(30,817)

Impact of foreign currency hedge instruments

-

(15)

-

Net debt

183,084

181,596

184,620

 

Furthermore, the Group's £25 million New Revolving Credit Facility (RCF) currently remains undrawn.

 

 

15. Retirement Benefit Obligation

For the purposes of these financial statements, the Group has applied the requirements of the standard IAS 19 Employee Benefits (Revised 2011).The standard replaces the finance cost on the defined benefit obligation and the expected return on plan assets with a net finance charge or income, based on the defined benefit liability or asset and the discount rate, measured at the start of the period.  The Group also applies the requirements of IFRIC 14 as they relate to the level of contributions agreed as part of refinancing. The company has no unconditional right ot any surplus.

 

Characteristics of the Group's pension related liabilities

The Johnston Press Retirement Savings Plan

The Johnston Press Retirement Savings Plan is a defined contribution Master Trust arrangement for current employees, operated by Zurich. Contributions by the Group are a percentage of basic salary. Employer contributions range from 1 per cent of basic salary, for employees statutorily enrolled, through to 12 per cent of basic salary for Senior Executives. Employees who were active members of the Money Purchase section of the Johnston Press Pension Plan on 31 August 2013 transferred from the Johnston Press Pension Plan to the Johnston Press Retirement Savings Plan from 1 September 2013.

 

The Johnston Press Pension Plan

The Johnston Press Pension Plan is a defined benefit pension plan closed to new members and closed to future accrual. There was formerly a defined contribution section of the Johnston Press Pension Plan which was closed in August 2013 and members' benefits were transferred to the Johnston Press Retirement Savings Plan. The assets of the schemes are held separately from those of the Group. The contributions are determined by a qualified actuary on the basis of a triennial valuation using the projected unit method and are set out in a Schedule of Contributions and Recovery Plan dated 29 July 2014.

 

A valuation of the Johnston Press Pension Plan as at 31 December 2012 was commissioned by the Trustees and takes account of the Capital Refinancing Plan.

 

In conjunction with the Capital Refinancing Plan, the Plan Trustees and the Company entered into a Pension Framework Agreement, agreeing, inter alia to the following:

 

·     On implementation of the Capital Refinancing Plan in June 2014, the secured guarantee provided in favour of the Plan Trustees by the Group and certain of its subsidiaries in relation to any default on a payment obligation under the Johnston Press Pension Plan has been removed. In return for the removal of this security and the aforementioned guarantee, an unsecured cross-guarantee has been provided on implementation of the Capital Refinancing Plan by the Group and certain of its subsidiaries in favour of the Plan Trustees in relation to any default on a payment obligation under the Johnston Press Pension Plan. Each claim made under the unsecured cross-guarantee is capped at an amount equal to the aggregate S75 debt of the Johnston Press Pension Plan at the date any claim made by the Plan Trustees falls due.

·     The deficit as at the 31 December 2012 valuation date will be sought to be addressed by 31 December 2024 by entry into a recovery plan providing for contributions starting at £6.3 million in 2014, £6.5 million in 2015 and £10.0 million in 2016 increasing by 3% per annum with a final payment of £12.7 million in 2024.

·     Settlement of unpaid PPF levies and Section 75 debts.

·     The Johnston Press Pension Plan will be entitled to receive 25% of net proceeds from business or asset disposals up to and including 31 August 2015 exceeding £1 million in a single transaction or £2.5 million over the course of a financial year, subject to certain permitted disposals, conditions in relation to financial leverage and other exceptions set out in the Framework Agreement.

·     The Group will also pay additional contributions to the Johnston Press Pension Plan in the event that the 2014/2015 PPF levy or the 2015/2016 PPF levy is less than £3.2 million, equal to the amount the levy falls below £3.2 million, up to a maximum of £2.5 million.

·     Additional contributions will also be payable to the Johnston Press Pension Plan in the event that the Group satisfies certain conditions in relation to financial leverage.

 

The Group paid 25% of net proceeds from the sale of its Republic of Ireland titles to the pension plan in September 2014, and settled all unpaid levies. The estimated levy expense for year ending March 2016 is £0.7 million. As a result of the expected levy reduction in 2015/16, the Group is committed to a maximum additional pension contribution of £2.5 million.

 

This funding agreement needs to be reflected in the valuation documentation of the Johnston Press Pension Plan, which must be submitted to the Pensions Regulator who may exercise certain powers if it is not compliant with the relevant legislation. If the Johnston Press Pension Plan's funding position deteriorates after successful implementation of the Capital Refinancing Plan then the contributions may have to be revisited and additional contributions to the Johnston Press Pension Plan may be required. Contributions would ordinarily only be revisited in the context of the triennial valuation of the Johnston Press Pension Plan, although the Plan Trustees have power to call a valuation earlier if they resolve to do so.

 

Irish Pension Schemes

In addition, the Group maintains liability for two defined benefit schemes providing benefits for a small number of former employees in Limerick and Leinster. Both schemes have been closed to future accrual since 2010 have been wound up.

 

Amounts arising from pensions related liabilities in the Group's financial statements

 

The following tables identify the amounts in the Group's financial statements arising from its pension related liabilities.

 

Income statement - pensions and other pension related liabilities costs

 

Note

4 July 2015

£'000s

28 June 2014

£'000s

3 January 2015

£'000s

Employment costs:

 

 

 

 

  Defined contribution scheme

 

(2,188)

(2,250)

(4,425)

 

 

 

 

 

  Defined benefit scheme

 

 

 

 

    Plan expenses1

 

(162)

(729)

(1,217)

    Pension protection fund

 

(859)

(680)

(2,038)

    Net finance cost on Johnston Press Pension Plan

6(a)

(1,504)

(1,750)

(3,330)

Total defined benefit scheme

 

(2,525)

(3,159)

(6,585)

 

 

 

 

 

Total pension costs

 

(4,713)

(5,409)

(11,010)

1Relates to administrative expenses incurred in managing the pension fund amounting to £162,000 recognised within operating items (2014: £729,000 (£349,000 recognised within operating items before exceptional items and £380,000 recognised within operating exceptional items)).

 

Other comprehensive income  -  (loss)/gain on pension

 

4 July 2015

£'000s

28 June 2014

£'000s

3 January 2015

£'000s

(Losses)/gains on plan assets in excess of interest

(3,897)

1,208

48,120

Experience gains and losses arising on the benefit obligation

-

(1,481)

(1,838)

Changes in assumptions underlying the present value of the benefit obligation

9,041

(11,874)

(65,261)

Additional defined benefit obligation under IFRIC 14

(3,900)

-

(2,971)

Actuarial (loss)/gain recognised in the statement of comprehensive income

1,244

(12,147)

(21,950)

Deferred tax

(249)

2,429

4,390

Actuarial (loss)/gain recognised in the statement of comprehensive income net of tax

995

(9,718)

(17,560)

 

Statement of financial position - net defined benefit pension (deficit)/surplus and other pension related liabilities

 

 

4 July 2015

28 June 2014

3 January 2015

 

£'000

£'000

£'000

Amounts included in the Group Statement of Financial Position :

 

 

 

Fair value of scheme assets

477,602

425,718

480,479

Present value of defined benefit obligations

(557,794)

(512,656)

(567,509)

Additional defined benefit obligation under IFRIC 14

(6,871)

-

(2,971)

Total liability recognised

(87,063)

(86,938)

(90,001)

Amount included in current liabilities

6,489

6,300

6,489

Amount included in non-current liabilities

(80,574)

(80,638)

(83,512)

 

 

15. Retirement Benefit Obligation (continued)

 

Analysis of amounts recognised of the net defined benefit pension (deficit)/surplus

 

 

 

4 July 2015

28 June 2014

3 January 2015

 

Notes

£'000

£'000

£'000

Net defined benefit pension (deficit)/surplus at beginning of period

 

(90,001)

(78,334)

(78,334)

 

 

 

 

 

Defined benefit obligation at beginning of period

 

567,509

498,640

(498,640)

 

 

 

 

 

Income statement :

 

 

 

 

Current service cost

 

-

-

-

Past service cost

 

-

-

-

Interest cost

6a

9,893

11,340

(22,706)

 

 

 

 

 

Other comprehensive income :

 

 

 

 

Experience (gains) and losses

 

-

1,481

(1,838)

Re-measurements of defined benefit obligation :

 

 

 

 

 arising from changes in demographic assumptions

 

-

-

1,536

 arising from changes in financial assumptions

 

(9,041)

11,874

(66,797)

 

 

 

 

 

Cash flows :

 

 

 

 

Age related rebates

 

-

-

-

Benefits paid (by fund and Group)

 

(10,567)

(10,679)

20,936

Defined benefit obligation at end of the period

 

557,794

512,656

(567,509)

 

 

 

 

 

Fair value of plan assets at beginning of period

 

480,479

420,306

420,306

 

 

 

 

 

Income statement :

 

 

 

 

Interest income on plan assets

6a

8,389

9,590

19,376

Pension Protection Fund payments

 

-

(680)

-

Administration costs

 

-

(729)

(837)

 

 

 

 

 

Other comprehensive income :

 

 

 

 

Return on plan assets less gain

 

(3,897)

1,208

48,120

 

 

 

 

 

Cash flows :

 

 

 

 

Company contributions - receivable

 

-

503

-

Company contributions

18 

3,198

6,199

14,450

Age related rebates

 

-

-

-

Benefits paid (by fund and Group)

 

(10,567)

(10,679)

(20,936)

Fair value of plan assets at end of period

 

477,602

425,718

480,479

 

 

 

 

 

Additional defined benefit obligation under IFRIC 14

 

(6,871)

-

(2,971)

Net defined benefit pension (deficit)/surplus at end of period

 

(87,063)

(86,938)

(90,001)

 

Analysis of fair value of plan assets

 

4 July 2015

28 June 2014

3 January 2015

 

£'000

£'000

£'000

Equities

81,827

63,593

67,283

Multi-asset credit

 

-

99,678

Bonds

110,189

101,804

-

Diversified Growth Funds

169,246

147,198

152,231

Liability Driven Investments

112,548

-

148,075

Others1

3,792

113,123

13,212

Total fair value of plan assets

477,602

425,718

480,479

1 Other mainly includes LDI, protected Rights Funds, index linked gilts, cash and cash equivalents.

 

Following extensive discussions with the pension trustees, Pension Regulator and the Company, it has been agreed that the mix of investments should be split 50% growth allocation and 50% protection allocation.

 

Analysis of financial assumptions

 

 

Valuation at

Valuation at

Valuation at

 

4 July 2015

28 June 2014

3 January 2015

Discount rate

3.85%

4.35%

3.55%

Future pension increases

 

 

 

  Deferred revaluations (CPI)

2.20%

2.05%

1.75%

  Pensions in payment (RPI)

3.20%

3.25%

2.85%

Life expectancy

 

 

 

  Male

22.0 years

22.2 years

22.0 years

  Female

23.9 years

24.2 years

23.9 years

 

 

 

Other pension related obligations

The Company has agreed to pay the expenses of the Johnston Press Pension Plan and the Pension Protection Fund ('PPF') levy as they fall due. Any funding agreement needs to be reflected in the valuation documentation of the Johnston Press Pension Plan, which must be formally submitted to the Pensions Regulator who may exercise certain powers if it is not compliant with the relevant legislation.

 

The Group has entered into a flexible apportionment arrangement with the agreement of the Plan Trustees which will result in a decrease in the 2015/16 PPF levy charge. The Group expects to see the full benefit of reduced levy charges in 2016/2017, when the increased pension contributions commence.

 

The Johnston Press Pension Plan (the "Plan") is subject to a potential increase in its liabilities in the event that historic benefit equalisation has not taken effect for a specific group of members at the intended time. The Group's lawyers advised that an application to court should be made for a declaration that normal retirement dates for these members were validly equalised as intended, and currently anticipate a successful outcome in the case. The Group has finalised an application to court which it has provided to lawyers acting on behalf of a representative beneficiary for the relevant members of the Plan, prior to its submission to the Court.  The Company expects the application to be submitted shortly with the expectation that the hearing would take place during the year or early next year. No provision has been made in the Group's assessed pension deficit or financial statements. Based on advice to the trustees of the Plan, the Group anticipates the maximum obligation in relation to this matter (in the event that the court application is not successful) to be in the region of £8 million.

 

IFRIC 14

At 4 July 2015, the Group was liable to an IFRIC 14 liability of £87.1 million (3 January 2015: £90.0 million) as the cash contributions agreed as part of the Recovery Plan dated 29 July 2014 were greater than the level of the deficit recorded. The contributions were discounted by applying a discount rate of 3.85% resulting in an additional liability recognition of £6,871,000.

 

 

16a. Share Capital

 

Ordinary  Shares

£'000

Opening Balance 3 January 2015 and closing balance at 4 July 2015

105,877,777

1,059

 

 

 

 

 

 

 

Preference Shares

£'000

Opening Balance 3 January 2015 & Closing Balance 4 July 2015

1,105,600

1,106

 

 

 

Total Share Capital 3 January 2015 & Closing Balance 4 July 2015

 

116,171

 

 

4 July 2015

3 Jan 2015

 

 £'000

 £'000

Issued

 

 

105,877,777 ordinary shares of 1p each

1,059

1,059

690,294,608 deferred shares of 9p each

62,126

62,126

5,293,888,850 deferred shares of 0.98p each

51,880

51,880

756,000 13.75% Cumulative Preference Shares of £1 each

756

756

349,600 13.75% 'A' Preference Shares of £1 each

350

350

 

 

 

Total Issued share capital

116,171

116,171

 

The Company has only one class of ordinary shares which has no right to fixed income. All the preference shares carry the right, subject to the discretion of the Company to distribute profits, to a fixed dividend of 13.75% and rank in priority to the ordinary shares. Given the discretionary nature of the dividend right, the preference shares are considered to be equity under IAS 32.

 

Share warrants

During the period there were no share warrants exercised (2014: 4,833,738 ordinary shares of 10p each were issued following the exercise of share warrants, generating £483,374 of cash for the Company). At the balance sheet date 30,359,979 warrants were outstanding, each giving the holder the right to subscribe for 0.1533799 ordinary shares at an exercise price of £1.9745 per share.

 

 

16b. Share Premium

 

4 July 2015

 

£'000

Opening Balance 3 January 2015

587,702

 

 

Share capital reduction

 

(275,000)

 

Closing Balance 4 July 2015

312,702

 

At the Company's Annual General Meeting on 27 June 2014, a special resolution was approved to initiate a process to reduce the Company's share premium account by £275 million. The capital reduction eliminates the opening accumulated deficit of £179.9 million on the Company's profit and loss account and creates positive distributable reserves of £98.2 million at 30 May 2015.  This enables the Company to pay out dividends and provide loans to the Johnston Press plc Employee Share Trust ("JP EST") to satisfy options under the Group's share ownership schemes.  The completion of the capital reduction was confirmed by an Order of the Court of Session, Scotland on 29th April 2015 and registered at Companies House on 5th May 2015.

17. Share-Based Payments

The Group issues share-based benefits to employees. These share-based payments have been measured at their fair value at the date of grant and the fair value of expected shares is being expensed to the Income Statement on a straight-line basis over the vesting period. Fair value has been measured using the Black Scholes model and adjusted to reflect the most likely share vesting and exercise pattern. The impact on the accounting periods has been:

 

 

4 July 2015

28 June 2014

3 January 2015

 

 

£'000

£'000

£'000

 

PSP, SAYE, CSOP, Deferred Bonus

 

 

339

 

131

 

676

Value Creation Plan1

4

463

-

231

Included in operating expenses

18

802

131

907

   1 Value Creation Plan treated as exceptional.

 

The cumulative provision for share-based payments of £14,243,000 (28 June 2014: £13,106,000; 3 January 2015: £13,780,000) is shown as a reserve in the Group Statement of Financial Position.

 

During the period the Group purchased own shares with a net cash value of £888,000 to satisfy accumulated deferred bonus and CSOP obligations.

 

 

18. Notes to the Cash Flow Statement

 

 

4 July 2015

28 June 2014

3 January 2015

 

Notes

£'000

£'000

£'000

Operating profit

 

22,242

24,918

10,713

 

 

 

 

 

Adjustments for non-cash  exceptional items:

 

 

 

 

Impairment of publishing titles

 

-

-

21,568

Write down of print presses

 

-

-

2,667

Write down in carrying value of assets held for sale

 

-

-

300

Exceptional pension protection fund levy

 

859

1,060

2,038

Exceptional refinancing bonus

 

-

-

3,911

Exceptional legal and other professional fees

 

-

(1,169)

-

Exceptional redundancy costs

 

949

-

7,320

Value Creation plan

17

463

-

231

 

Cash exceptional items:

 

 

 

 

Exceptional legal and other professional fees

 

(1,483)

-

(1,169)

Exceptional redundancy costs

 

(5,311)

(14,003)

(17,210)

Exceptional protection fund contribution

 

-

-

(2,718)

 

 

 

 

 

Adjustments for non cash items:

 

 

 

 

Amortisation of intangible assets

 

162

265

194

Depreciation charges

 

3,000

2,430

5,306

Charge for share based payments

17

339

131

676

Pensions administrative expenses

 

-

349

837

Profit on disposal of property, plant and equipment

 

(263)

(1,589)

(1,979)

Currency differences

 

(288)

16

(34)

 

 

 

 

 

Operating items before working capital changes:

 

 

 

 

Net pension funding contributions

15

(3,341)

(6,199)

(14,450)

Movement in long term provisions

 

(557)

(381)

613

Cash generated from operations before workings capital changes

 

 

16,771

 

5,828

 

18,814

 

 

 

 

 

Working capital changes :

 

 

 

 

Decrease in inventories

 

370

465

2

(Increase)/decrease in receivables

 

(143)

(8,248)

(2,528)

Increase/(decrease) in payables

 

7,985

(510)

(9,970)

Cash generated from operations after working capital changes

 

24,983

(2,465)

6,318

 

Adjustment for non-operating items:

 

 

 

 

Net pension funding contributions

 

 

 

 

Annual contribution

 

3,179

2,850

6,300

PPF levy, S75 contributions and plan expenses

 

162

3,349

6,414

Asset and business disposals

 

-

-

1,736

One-off adjustment - net pensions funding contributions

 

3,341

6,199

14,450

 

Redundancy costs

 

 

 

 

Non cash exceptional redundancy costs

 

(949)

-

(7,320)

Cash exceptional redundancy costs

 

5,311

14,003

17,210

One-off adjustment - redundancy costs

 

4,362

14,003

9,890

 

Cash generated from operations after working capital changes and adjustment for one off items

 

 

32,686

 

17,737

 

30,658

 

Adjustment for one-off items

 

 

 

 

Net pensions funding contributions

 

(3,341)

(6,199)

(14,450)

Redundancy costs

 

(4,362)

(14,003)

(9,890)

Cash generated from operations

 

24,983

(2,465)

6,318

 

19. Contingent Liability

On 1 April 2014, the Group entered into a sale agreement with Iconic Newspaper Limited for the sale of the trade and assets of the Group's regional newspapers in the Republic of Ireland, including Donegal titles, for £7.1 million.

 

As a condition of the sale, Johnston Press plc agreed to provide guarantee in respect of the performance of certain obligations of the entities within the Group making the disposal of the trade and assets up to a maximum aggregate limit of £3 million.

 

That guarantee will be effective for up to 36 months following the completion of the sale.

 

20. Related Party Transactions

There have been no related party transactions that have occurred during the first 26 week of the financial year that have materially affected the financial position or performance of the Group during that period and there have been no changes in the related party transactions described in the 2014 Annual Report and Accounts that could do so.

 

21. Post Balance Sheet Events

Other than changes to tax legislation not yet enacted as mentioned in note 7 there were no significant post balance sheet events requiring disclosure in the accounts.

 

Independent review report to Johnston Press plc

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 4 July 2015 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated balance sheet, the condensed consolidated cash flow statement and related notes 1 to 21. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 4 July 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

11 August 2015


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